This would be just one IP dispute in thousands handled by US courts every day, except for two unique features: the contention is over a virtual sex bed which doesn’t exist, and the named defendant also doesn’t exist. As such, the suit will establish an enormous precedent in the new realm of virtual world law, however it shakes out.

I should back up and explain those last three sentences.

Linden Lab, the company which provides Second Life’s virtual land (i.e. server grid) and means to explore it (i.e. interface software and currency) has since late 2003 allowed its users to retain the underlying intellectual property rights to all objects and programs created in the world with its internal building and scripting tools.

This policy unleashed enormous user-created innovation, and enabled thousands of users to make a living with their virtual content creation. Alderman, known in Second Life as Stroker Serpentine (pictured) is one of SL’s leading entrepreneurs; his SL-based adult entertainment industry has become so successful, he recently sold his X-rated Amsterdam island in Second Life to a real world Dutch media firm for $50,000 very real dollars.

For the last fours years, this IP rights policy has been working more less as designed, but those who follow the virtual world business have been waiting for the other shoe to drop: what happens when one avatar tries to sue another avatar for copyright infringement in an actual court?

It finally has: Alderman/Serpentine believes Catteno is selling unauthorized copies of his SexGen bed, a piece of furniture with special embedded animations that enable players to more or less recreate an adult film with their avatars. Alderman sells his version for the L$ equivalent of USD$45, and they’ve helped make his fortune. Catteno is selling his alleged knockoff for a third that price, undercutting him.

But who does Kevin Alderman sue? Since SL users have no obligation to reveal their real life identity to other players, all the relevant data exists only on Linden’s servers and files. This is why Alderman is threatening to subpoena Linden Lab for this data, so he can bring the real person behind Catteno to trial.

I contacted Stroker Serpentine in Second Life and asked why he chose going to trial. Volkov Catteneo’s account was created in February 2007, while Stroker is a longtime and well-loved player. Why not just voice his complaint about Catteno to the SL community, so they can ostracize him and his allegedly infringing beds?

Stroker tells me he did try that method in another case, but ironically, it backfired. “[T]he last time this happened I confronted the individual about it and requested that they cease and desist…,” he says, “I was made out to be a bully and dragged through the [SL community] forums.” Linden Lab has a system for letting users file DMCA notices against each other; Stroker tried that twice, but wasn’t happy with how Linden responded. So he found a law firm specializing in copyright/trademark disputes. “We weighed all alternatives and listened to a lot of advice. So here we are.”

Trouble is, Catteno tells Reuters he doesn’t have any real world data on file with Linden Lab. (A plausible claim; since ’06, it’s no longer necessary to register a credit card or other identifying data with Linden Lab.) I imagine the company could supply Alderman and his lawyers with Catteno’s IP address, and let them deal with it from there. Or if it goes forward in court, perhaps the judge will review the case, decide it’s fundamentally nuts, and toss it. Then again, the court might let it go to trial, as it did with another user lawsuit against Linden Lab, and what happens then is anyone’s guess. Numerous companies which depend on user-created content are waiting to see. In any case, may the best avatar win.

Update, 9:00am: For the legally minded, Reuters’ SL reporters (who broke this story) have put the actual legal form in .pdf at this link.